A - Z: Real Estate Terminology

A - Z: Real Estate Terminology
Saving for a deposit is hard.
House hunting is hard.
Negotiating isn’t natural for everyone.
Then on top of it all is the real estate jargon! And yes, we are guilty of it too. So here is a list of some of the commonly used real estate terminology.
Amortisation period
The number of years it will take to fully pay off a home loan
Appreciation
An increase in the value of a property
Bank valuation
A bank’s estimate of a property’s value. This is often more conservative than the actual market value
Bridging finance
A short-term loan used to allow someone to purchase a new property prior to selling their property
Capital gains
The profit on the sale of a capital asset. In real estate this might be an investment property.
Caveat
A notification on the title declaring a party other than the owner may have an interest in the property
Caveat emptor
Latin for “buyer beware”. In a property transaction, the purchaser carries the risk. In other words, do your homework
Capital gains tax
Capital gains tax. In real estate terms, this is a tax levied on profit from the sale of an investment property (not the family home)
Depreciation
A reduction in the value of an asset over time
Disbursements
Costs incurred by a real estate agent, which can be passed on to the client, for example photography and advertising costs
Equity
The value an owner of a property has in the asset above the debt owed.
Exchange of contracts
The legal process that creates a binding agreement for the sale of a property. A deposit is usually paid at this time, and may be forfeited if either party backs out of the agreement
Exclusive listing
When a vendor has signed an agreement to make an agent solely responsible for the sale of a property during a specified period. If another agent sells the property during that time, the original agent is entitled to any commission
Fittings
Items in a home that can't be taken out without damaging the items or the space in which they were located. Includes washing machines, refrigerators and other items not usually included in a property sale
Guarantor
Someone who agrees to fulfil a contract if the main party to the loan defaults
Interest
The amount paid by a borrower to a lender in addition to the main amount borrowed (the “principal”). The interest rate can be fixed, variable or a combination of the two (“split loan”)
Interest only loan
When only the interest is repaid during the term of a loan. The principal is repaid after the loan term expires
LMI
Lenders mortgage insurance. Often payable when a borrower doesn’t have a big deposit, it’s designed to protect the lender against default
LVR
Loan-to-value ratio: the proportion of money borrowed versus the value of a property. When the LVR is high (over 80 per cent, for example), a lender is more likely to charge lenders mortgage insurance
Mortgage protection insurance
An insurance policy which covers a borrower’s mortgage repayments in the event of illness or injury
Negative gearing
When the earnings (income) (rent) from an investment property are less than the costs associated with the investment. The shortfall can be used to reduce tax liability in Australia, for now
Offset account
In a mortgage offset account or home loan offset account, the credit in the account is offset daily against the home loan balance, reducing the interest charged accordingly
Reserve price
The lowest price a vendor has agreed to accept when selling a property
Reverse mortgage
A type of mortgage, usually used by older homeowners, where repayments don’t need to be made until after the property is sold, or the last homeowner dies
Settlement date
The date on which a property sale is finalised. The purchaser pays the vendor and gains possession of the home at this time. Also the day the purchaser gets the keys to the property
Stamp duty
Tax levied on a contract, calculated as a percentage of the contract value. Varies between states and territories. In NSW Stamp Duty is paid by the purchaser
Title
The type of property ownership, for example Torrens title, strata title or company title
Trust account
A type bank account managed by a real estate where funds (such as deposits and rental income) are held on behalf of someone else
Yeild
The annual rental income of an investment property, expressed as a proportion of the property’s value
Zoning
An urban planning tool used by local governments to determined how land is to be used. Examples include low density residential, high density residential, mixed use or commercial. Essentially it is what your local council (or NSW Gov) will allow to be built on a piece of land